News: MAS: Exercise caution in taking up housing loans

Nov 26, 2018

Home buyers should remain prudent in their buying decisions on the back of rising interest rates and the upcoming supply of new homes.

While the recent curbs had slowed the pace of property price hikes and transactions, the Monetary Authority of Singapore (MAS) has called on prospective home buyers “to carefully consider” the impact of rising interest rates and the upcoming supply when taking up loans, reported the Straits Times.

Given the “headwinds of rising interest rates” and the expectation that rental yields will remain weak, prospective buyers should remain prudent in their buying decisions, factoring in likely hikes in their debt-servicing burdens, said MAS.

“Over-leveraged households could also see a rapid deterioration in their balance sheet indicators if there is a sharp correction in property prices,” it added.

For the third quarter of 2018, household debt rose three percent year-on-year, on the back of a 3.4 percent hike in housing loans, said MAS in its annual Financial Stability Review.

It noted that the value of new housing loans as of July jumped 30 percent year-on-year as residential property demand picked up.

The property cooling measures rolled out by the government in July helped “temper the pace of price increase and land sales activities”.

This comes as Singaporeans and permanent residents purchasing their second and successive properties are required to pay more in stamp duties under the new measures.

The government raised the Additional Buyer’s Stamp Duty applicable to them by five percentage points, while the loan-to-value limit – or the proportion of a property’s value which a buyer could borrow – was cut by five percentage points.

“Sharp increases in prices, if left unchecked, could have run ahead of economic fundamentals and raised the risk of a destabilising correction later, especially with rising interest rates and the strong pipeline of housing supply,” MAS said.